Cobblepot and Nygma founded the Iceberg Lounge, Inc. as equal shareholders (Nygm
ID: 2541088 • Letter: C
Question
Cobblepot and Nygma founded the Iceberg Lounge, Inc. as equal shareholders (Nygma is the lounge act). At the end of the year, each receives a cash distribution of $500,000. Iceberg’s current year taxable income is $1 million and it has no accumulated E & P. (Riddler's act isn't very good). Two years ago, Iceberg sold air conditioning equipment to Mr. Freeze for $1,200,000 (basis of $400,000). Payment for one-half of the sale of the asset was made last year, the balance this year--in cold cash. How much of Nygma’s distribution will be taxed as a dividend?
$0
$300,000
$500,000
$600,000
None of the above
a.$0
b.$300,000
c.$500,000
d.$600,000
e.None of the above
Explanation / Answer
Answer
B.$300,000
last year payment = 1200000/2 =600000
for this year half payment 600000
600000 distribute between two Nygma and Cobblepot are equal because of equal shareholders
So,300000 will be taxed as a dividend for Nygma